What Lies Ahead for Payment Processing in High-Risk Industries?

If you’re struggling to get by with payment processing in high-risk industries, you know all too well the unique headaches that other businesses just don’t face. Whether you’re dealing with sky-high chargeback rates, a minefield of compliance regulations or a complete lack of processor options, we get just how tough things can be. So if you’re looking to get a handle on how the payment processing landscape is shaping up and what opportunities might be on the horizon for your high-risk business, you’ve come to the right place.   High risk payment processing is a specialized service designed to handle the complex financial needs of businesses which are constantly battling elevated chargeback rates, regulatory complexities and potential reputational damage – like online gambling (which sees a whopping 3.5% chargeback rate), CBD commerce (2.5% chargeback rate), adult entertainment and cryptocurrency platforms. This is a sector worth a cool $46.2 billion globally in 2024 and it includes advanced fraud detection systems, specially tailored underwriting processes and higher fee structures that reflect the increased risk that these merchants pose to financial institutions.   TL;DR Breakdown: This article takes a look at the key factors driving change in high-risk payments and what they mean for merchants. For a quick rundown of the main points, try using this handy checklist:

• Chargebacks are at least 35 times worse for high-risk businesses than they are for regular merchants.
• Payment processing fees for high-risk businesses are 3-10%, but only 1.5-2.9% for everyone else.
• Fines for regulatory non-compliance hit $200 million over three years for high-risk merchants.
• AI and blockchain tech have got fraud detection accuracy up to 90%.
• Top of the line services and flexible fee structures are now available from processors.
• Businesses are fighting back against $28.1 billion in projected CNP fraud by 2026 using new security tools.
• Market growth is expected from $46.2B in 2024 to $151.6B in 2033.
• And finally, how 2Accept supports high-risk businesses with some really useful solutions.

Practical Tip: When comparing processors, don’t just go with whatever seems the cheapest – do your sums and factor in all the hidden costs that can eventually add up and surprise you. Here’s a good starting point:

• Transaction fees
• Monthly subscription fees
• Chargeback fees
• Setup costs
• Rolling reserve requirements

  As we look at what drives high-risk industries in payment processing, you’ll start to see how certain types of business get categorised as high-risk – and what specific factors push financial institutions to class them differently to regular, low-risk merchants.

What Defines a High-Risk Industry in Payment Processing?

A high-risk industry in payment processing is defined as any business category where financial institutions identify a higher risk of chargebacks, fraud or regulatory complications. Well, in simple terms it’s when financial institutions identify a higher risk of chargebacks, fraud or regulatory complications. And these classifications can have a major impact on the services and fees that merchants are eligible for.

Which Business Types Get Classed as High-Risk Most Often?

High-risk classifications cluster around a few particular industries which tend to see higher chargeback rates and regulatory complexities. The most commonly cited categories are:

• Online gaming and sports betting (3.5% chargeback rate)
• Adult entertainment industries (3.5% chargeback rate)
• CBD retailers (2.5% chargeback rate)
• Cryptocurrency platforms
• Certain e-commerce sectors

According to a 2024 industry analysis, online gaming and sports betting sectors have some of the highest chargeback rates at 3.5%. Adult entertainment industries also see a chargeback rate of 3.5%. CBD retailers experience a chargeback rate of about 2.5% based on data from 2024. Cryptocurrency platforms are high-risk due to regulatory uncertainty across jurisdictions, while e-commerce platforms operating in high-risk sectors are a key contributor to the $46.2 billion global high-risk payment processing market value in 2024.

Why Do Financial Institutions Classify Certain Sectors as High-Risk?

Financial institutions class certain sectors as high-risk because they see a lot more chargebacks and fraud than industries like food and beverages, which maintain chargeback rates of around 0.1%. 80% of all chargebacks in high-risk industries are the result of fraudulent activities, according to a 2024 payment industry report.   Card-not-present fraud is projected to reach $28.1 billion by 2026, up 40% from 2023, and friendly fraud is expected to rise by 40% by 2026. This is because of consumer behavior, and it drives financial institutions to enforce stricter controls, higher fees, and enhanced monitoring for merchants in these sectors.   Understanding these risk classifications can help high-risk businesses like those supported by 2Accept get ready for the specific payment processing requirements and identify the right merchants service providers.

Why Is Payment Processing Such a Challenge for High-Risk Businesses?

Payment processing for high-risk businesses brings a host of unique challenges that standard merchants can only dream of. High-risk merchants face transaction fees ranging from 3% to 10%, compared to 1.5% to 2.9% for standard merchants. Setup fees for high-risk accounts can be as high as $100 to $500, while standard accounts typically pay $0 to $50.   Financial Institutions put a big squeeze on high-risk merchants by requiring them to keep reserve cash on hand of 5% to 15% of their transactions, something that standard merchants don’t have to do at all. This is because they’re dealing in high-risk areas like online gambling, adult entertainment and CBD sales where there’s a higher chance of getting hit with chargebacks and fraud.

What Unique Pain Points Do High-Risk Merchants Face with Payment Processing

High-risk merchants face some pretty steep transaction fees – ranging from 3% to 10% of each transaction – as compared to standard merchants who pay a much lower 1.5% to 2.9%. A recent industry analysis found that setting up a high-risk merchant account can cost anywhere from $100 to $500 – way more than the $0 to $50 that standard merchants pay. And as if that weren’t enough, they have to keep those reserves of 5% to 15% on hand while standard merchants get off scot free. And when chargebacks do happen, high-risk merchants are on the hook for fees ranging from $25 to $100 per incident – compared to $15 to $25 for standard merchants.

Merchant Type	Fee Category	Typical Range	Year
High-risk merchants	Transaction fees	3%-10%	Industry 2024
Standard merchants	Transaction fees	1.5%-2.9%	Industry 2024
High-risk accounts	Setup fees	$100-$500	Industry 2024
Standard accounts	Setup fees	$0-$50	Industry 2024
High-risk merchants	Rolling reserves	5%-15%	Industry 2024
High-risk businesses	Chargeback fees	$25-$100	Industry 2024

These costs create all sorts of operational headaches for businesses in high-risk areas – problems that ultimately cut into their bottom line.

How Do Chargebacks & Fraud Impact High-Risk Payment Ecosystems

Chargebacks and fraud are wreaking havoc on high-risk payment ecosystems – causing problems that are way beyond just the cost of the transaction.   According to a bunch of industry reports, fraud and chargebacks are taking a huge toll on businesses in high-risk areas. Here are just a few examples:

• Fraud & chargeback rates for sports betting and adult entertainment are a whopping 3.5%
• The CBD industry is seeing a chargeback rate of 2.5% – a number that’s way higher than the overall retail average
• and 80% of all chargebacks in these high-risk areas are actually the result of people just flat out lying about the transactions – known as ‘friendly fraud’

Fraudsters are getting pretty predictable in their methods – which is good in a way, because it means processors can start to take steps to prevent it from happening in the first place. But it also means that processors are having to get a lot more aggressive in their efforts to keep an eye out for it. which ends up driving costs up for merchants.   Payment processors are responding to all of this by slapping on higher fees to try and recover the losses. This creates a cycle where high-risk businesses are getting squeezed from all sides – on the one hand, they’re getting charged more for payment processing, and on the other hand, they’re getting hammered with higher chargeback fees and higher reserve requirements.

How Are Regulations Affecting Payment Processing in High-Risk Sectors

Regulatory bodies are cracking down on payment processors in the high-risk sector – forcing them to meet stricter standards and ultimately driving up costs for high-risk merchants.   The Department of Justice and the Federal Trade Commission have taken action in the last three years against over ten payment firms – resulting in fines of over $200 million. This is because these firms haven’t been doing enough to prevent and detect fraud in high-risk areas.   New regulations like the Digital Operational Resilience Act (DORA) are also being rolled out in the UK and EU, forcing payment firms to do a whole lot more to keep track of all the interdependencies in their systems. And this is just the tip of the iceberg – McKinsey is reporting that the payments industry as a whole is facing all sorts of risks, from regulatory scrutiny to changes in global standards.

What Compliance Challenges Are Specific to High-Risk Industries

High-risk businesses are dealing with all sorts of compliance headaches – from fines to complex operational requirements.   Regulatory bodies have taken a strong hand in enforcement actions against payment firms – and the results have been eye-popping. With fines of over $200 million in just the last three years, it’s clear that these firms haven’t been taking compliance seriously enough.   The DORA regulation in the UK and EU is raising the bar for payment firms – requiring them to demonstrate ‘operational resilience’ by having comprehensive risk management frameworks in place. And this is just the beginning – McKinsey is saying that the payments industry as a whole is facing huge regulatory challenges.   High-risk payment processors need to step up their compliance game if they don’t want to get slammed with fines – this means things like continuous monitoring, transaction pattern analysis, and anti-money laundering regulations. It’s a whole lot more complicated than it used to be.

How Do Evolving Laws Influence Payment Processor Selection

Evolving laws are making it a lot harder for businesses to find a payment processor they can trust. It’s like the bar just keeps getting higher and higher.   With new regulations like DORA driving up the cost of compliance, it’s no wonder that high-risk merchants are getting a little desperate for options. UK and EU regulators are putting the squeeze on payment firms – and US regulators are getting in on the act too.Payment firms must have the means to seriously ramp up their due diligence so they don’t get hit with regulatory fines. Key to this is having real time transaction monitoring, plus robust merchant verification processes and compliance management systems that can stand up to scrutiny. Processors dealing with high-risk transactions need special licenses and qualifications to stay in the game in regulated markets.   Compliance requirements are nudging high-risk merchants towards processors with real expertise in staying on the right side of the law. These processors have dedicated teams dealing with compliance, are big on regulatory technology and have well-established relationships with the financial institutions. When picking a processor now it’s no longer just about who offers the lowest fees but also who can actually handle compliance in house.   As regulations keep changing, processors of high-risk transactions have to keep adapting their systems and procedures to stay in line with the latest. And at the same time, they have to be able to help the merchants navigate the complex compliance landscape.

What New Payment Technologies Are Making High-Risk Businesses Better Off?

Innovations in payment tech are transforming the way high-risk businesses do business through AI, blockchain solutions and far more advanced risk management systems. Financial institutions are fast moving to embrace these technologies because they think they can help beat the predicted $28.1 billion in card-not-present fraud by 2026.   The following innovations show just how much technology is changing risk management and payment efficiency for high-risk merchants.

How is Ai Making Risk Management Better In Payment Systems?

AI is a game-changer in payments when it comes to risk management, automatically detecting fraud in real time and analysing each transaction in real time. A study released in 2024 shows that 71 percent of financial institutions are using AI and machine learning for fraud detection – that’s up from 66% last year. And these AI systems achieve accuracy, precision and recall rates of 90%, 85% and 80% respectively.   Real-time transaction analysis lets the AI systems immediately flag and block suspicious transactions. Machine learning algorithms keep learning from the patterns and anomalies it detects, so they get better and better at spotting the bad stuff. Payment processors use these systems not just to analyse transactions, but also to look at the velocity, geography and behaviour of the transactions.   The benefits of AI in risk management include: • Cutting down on false positives through pattern learning • Automating decision-making on transaction approvals • Predictive risk scoring for merchant accounts • Enhanced customer authentication processes AI can handle millions of transactions in seconds, spotting suspicious patterns that a human might miss. These innovations not only help high-risk merchants reduce chargeback rates but also boost approval rates for legitimate transactions.

What Role Does Blockchain Play in High-Risk Payment Solutions?

Blockchain is a key player in high-risk payment solutions by wiping out chargebacks and cutting transaction costs. Global spending on crypto in e-commerce was a whopping estimated $20 billion in 2024. The crypto gambling market went from $50 million in 2019 to $250 million in 2024 – 400% growth.   Blockchain-based systems cut chargebacks to zero with irreversible transactions. That’s especially good news for high-risk merchants who are hit with chargeback rates of 2.5% to 3.5%. Decentralized payment networks bring transaction costs under traditional high-risk processing fees of 3% to 10%.   Blockchain advantages for high-risk payments include: • Settlement in seconds without going through banks • Transparent record of transactions • Lower cross-border payment costs • Enhanced security through cryptography Smart contracts can automate payment processing rules, keeping the processor out of trouble. This innovation helps high-risk merchants access global markets that were previously out of reach due to banking restrictions.

How Are Payment Processors Adapting to Serve High-Risk Merchants Better?

Payment processors are adapting to better serve high-risk merchants by rolling out specialized features, optimized fee structures and evolving underwriting processes that’s geared towards high-risk merchants.   Premium processors are offering transaction rates between 3.5% to 5%, which is a much better deal than standard high-risk rates of 3% to 10%. These new features address the unique challenges faced by online businesses in sectors like online betting, CBD and crypto trading.

What Features Make Modern High-Risk Payment Gateways Stand Out?

Modern high-risk payment gateways stand out by combining innovative underwriting, cutting-edge tech and pricing features such as competitive transaction rates, AI fraud tools and multi-currency support. Look for gateways that:

• Charge transaction rates between 3.5% to 5% (standard high-risk rates are 3% to 10%)
• Have monthly fees between $20 and $40
• Use AI to detect fraud with 90% accuracy
• Have rolling reserves of 5% to 10%
• Are API-based, hosted or mobile SDK
• Support multiple currencies and payment methods

How Are Underwriting Processes Changing for High-Risk Accounts?

Underwriting processes for high-risk accounts are changing for the better, thanks to lower fees, new tech and streamlined approval procedures. Underwriting is evolving to faster, data-driven approvals with tighter compliance. Some key changes include:

• Setup fees of $50 to $250 for premium accounts
• Chargeback fees reduced to $20 to $50
• Thorough KYC and KYB procedures
• AI-powered underwriting for faster, more accurate approvals
• Tiered risk categories for more precise pricing* Ongoing monitoring that keeps risk ratings up to date

The way underwriting is done is changing as the payment industry moves away from guesswork and towards using real data to make decisions and stay on top of regulations, giving high-risk merchants access to more affordable and easier payment processing options while keeping the necessary risk controls in place.

What Do High-Risk Businesses Need to Think About When Choosing a Payment Processor?

High-risk businesses need to think about security, fraud prevention tools, fee structures and partnership terms when choosing a payment processor. The whole process of choosing a processor requires comparing them against industry standards while making sure you’re getting the latest tech that will help you deal with projected $28.1 billion in card-not-present fraud by 2026.   Getting to the bottom of these key factors will help high-risk merchants find reliable payment processing partnerships that keep their revenue safe and compliant.

What’s Gone from Being a Nice-to-Have to a Must-Have in Security and Fraud Prevention?

Security and fraud prevention tools that are must-haves for high-risk businesses now include AI-powered detection systems, real-time monitoring, and advanced pattern recognition technologies. Modern payment processors need to be able to spot and block suspicious transactions 90% of the time with their AI and machine learning. These systems check transaction patterns in real-time to stop suspicious activity before it’s too late.   Real-time transaction monitoring can spot suspicious patterns in a matter of milliseconds when a transaction is initiated. To handle the expected $28.1 billion in card-not-present fraud by 2026, processing systems have got to be able to update their algorithms and use behavioural analysis all the time.   To deal with the expected 40% rise in friendly fraud cases by 2026, high-risk processors use layered controls. So here are the things that you should be prioritising:

• Tokenisation systems that replace card numbers with secure tokens
• 3D Secure requires customers to verify themselves
• Velocity checks on transaction frequency and amounts
• Geographic verification – checking if IP addresses are from the right country
• Device fingerprinting – tracking the hardware behind transactions

High-risk merchants need processors that are able to do comprehensive fraud scoring that takes into account more than one risk factor at a time. This keeps businesses safe from financial losses while keeping legitimate transactions going.

How Should High-Risk Merchants Check Out Payment Processor Partnerships?

High-risk merchants should compare payment processor partnerships by looking at fees, reserves and setup costs against what’s normal in the industry. Transaction rates for high-risk businesses can be anything from 3% to 10%, so getting a good rate is really important for making a profit. Premium processors can offer rates between 3.5% and 5%, which is much better than average high-risk rates.   Chargeback fees are worth thinking carefully about as well – industry standard is $25 to $100, but premium services can reduce that to $20 to $50. Each chargeback not only hits your finances right away, but also affects your long-term relationship with your processor and your account stability.   Rolling reserve requirements are usually between 5% and 15% of transaction volume – processors hold these funds as a kind of insurance against chargebacks and refunds. High-risk merchants should try to get the lowest reserve percentage and the shortest release schedule they can based on their transaction history and risk profile.   Setup costs can be as much as $100 to $500 for high-risk accounts. Premium processors will often offer reduced setup fees of $50 to $250 for qualified merchants. Alongside per-transaction rates, you’ve got one-off and ongoing costs that will affect your ROI. Key line items include:

• Application processing fees
• Payment gateway integration costs
• Compliance certification expenses
• Monthly maintenance charges ranging from $25 to $50

Evaluating a partnership is not just about the price any more – you also need to look at service quality, technical support and integration capabilities. Merchants benefit from processors that offer dedicated account management and 24/7 technical support. Getting a handle on these evaluation criteria will help high-risk businesses choose a processor that fits with their needs and long-term plans.

How Could Future Trends Change the Face of Payment Processing for High-Risk Industries?

Future trends change payment processing for high-risk industries through market expansion, technological innovation and new payment types. The global high-risk payment processing market is expected to balloon to $151.6 billion by 2033, growing at 13.5% CAGR, according to market research in 2024.   These changes reshape risk management approaches and create new opportunities for high-risk merchants.

What Impact Will Globalisation and New Markets Have?

Globalisation and new markets have a big impact on high-risk payment processing through geographic expansion and growth patterns. Right now North America dominates the market because of its strong e-commerce ecosystem and favorable regulatory environment. The Asia Pacific region is emerging as a high-growth area because of its digital economy and rising internet penetration rates.   Europe is experiencing steady growth because of its tough compliance requirements and adoption of digital payments. A 2024 industry analysis says the global high-risk payment processing market will reach $151.6 billion by 2033, growing at 13.5% CAGR. Different regions present opportunities for processors specialising in cross-border high-risk transactions.   Market expansion lets high-risk merchants tap into previously unreachable customer bases through localised payment solutions. These global trends point to continued growth opportunities for payment processors that specialise in high-risk industries.

Are Cryptocurrency and New Payment Types Changing the Risk Dynamic? Cryptocurrency and Alternative Payments – Changing the Rules of the Game

Yes, cryptocurrency & alternative payment methods are about to turn the whole risk dynamics on its head – by wiping out traditional chargeback vulnerabilities and bringing down processing costs. Global spending on cryptocurrency e-commerce soared to a whopping $20 Billion in 2024 – as per blockchain analytics firms. And let’s just say, the crypto-gambling market exploded – a whopping 400% growth between 2019 and 2024 – reaching a tidy $250 million, according to industry tracking data.   The beauty of blockchain transactions lies in the irreversible payment mechanisms they offer – eliminating traditional chargeback risks. Decentralized systems bring down transaction costs to a fraction of what high-risk processing fees used to be – which is a whopping 3-10% in some cases. These alternative payment methods also give high-risk merchants a much-needed shield against the projected $28.1 billion CNP fraud by 2026 – which would have otherwise left them on the hook for a nasty fine.  

Category	Metric	Value	Year
Cryptocurrency e-commerce	Global spending	$20 billion	2024
Crypto gambling market	Growth rate	400%	2019–2024
Crypto gambling market	Market size	$250 million	2024
Blockchain transactions	Chargeback risk	0%	2024

All of which points to one clear conclusion – these alternative payment systems are fundamentally going to change how high-risk merchants approach transaction processing and risk management strategies.

How 2Accept Can Support High-Risk Businesses Navigating the Future of Payment Processing

2Accept is a payment processing platform that’s been specifically designed to help high-risk businesses navigate this evolving landscape. They’ve got solutions that address the unique challenges that come with being in a high-risk industry – where chargeback rates can reach a sky-high 3.5% and processing fees are 2-3 times what standard rates are. The High-Risk Payment Processing Market – One That’s Gonna Get a Whole Lot Bigger The high-risk payment processing market is projected to grow from $46.2 billion in 2024 to a mind-boggling $151.6 billion by 2033 – so you can bet that 2Accept is positioning itself as a strategic partner for businesses in this space – with advanced fraud prevention and regulatory compliance capabilities.

2Accept’s Payment Solutions for High-Risk Industries

2Accept offers comprehensive payment gateway services that are tailored to the needs of high-risk merchants – who have to deal with industry-standard transaction fees of 3% to 10%. They’ve got AI-powered fraud detection systems that are accurate to a whopping 90% – addressing the projected $28.1 billion in card-not-present fraud expected by 2026. They also optimize rolling reserve requirements between 5% to 10% – which is well below the industry maximum of 15%.   2Accept also supports global transactions across high-risk sectors like online gaming, CBD businesses, and cryptocurrency platforms – with real-time transaction monitoring that flags up fraudulent patterns right away. And the best part? Setup fees are as low as $50 to $250 – which is significantly lower than the industry average for high-risk accounts. Chargeback Management 2Accept’s chargeback management system keeps fees between $20 to $50 per incident – which is way lower than the industry standard of $25 to $100 per incident. They also support both traditional and alternative payment methods – including cryptocurrency transactions that eliminate chargeback risks through irreversible blockchain payments.

The Key Takeaways About the Future of High-Risk Payment Processing

Here are the key takeaways – the high-risk payment processing market’s gonna grow from $46.2 billion in 2024 to a whopping $151.6 billion by 2033 – driven by increasing digital commerce adoption. There’s also been a marked shift towards using AI and ML for fraud detection – which is a good thing, given the regulatory enforcement that’s intensified over the past three years – with over $200 million in fines issued for insufficient merchant due diligence. The Need for Specialized Payment Processors High-risk businesses need to prioritize payment processors that offer AI-driven fraud prevention, regulatory compliance expertise, and competitive fee structures if they want to succeed in this evolving landscape.